HBC leveraged its real estate knowledge to secure an additional $340 million in cash that can be used to strengthen its retail business. And chief executive Richard Baker is also using the sale as an opportunity to highlight his company’s real estate backbone.
“HBC is a holding company,” Baker told WWD during a briefing on his business empire on Sunday. “Our biggest business is real estate. Everyone seems to forget that I was, and still am, a real estate agent, but HBC is primarily a real estate company. It owns real estate worth billions of dollars.
“We regularly monetize real estate assets based on pre-organized campaigns,” he said. “We have a large team working on approvals, leasing, sales, etc.”
The Company owns or manages approximately 42 million square feet of gross leasable area in North America, either wholly or with joint venture partners.
Noting that HBC is investing in its own digital luxury business, Baker said: “We are a wealthy company that owns real estate companies, and we are using the cash flow generated from real estate to nurture and grow our business.” “There is,” he said.
“Saks.com will become the most important, largest, and most powerful luxury digital retailer in the entire world,” Baker asserted. “Saks.com picked up the business while everyone else ran out of money and fell into the ground because we invested in the business.”
Baker said the deal contained an agreement that prevented him from identifying specific properties, but that the new money currently flowing into HBC is from last week’s property sales in Canada and the United States.
HBC sells between $300 million and $500 million of real estate each year to raise funds to strengthen its balance sheet, but it doesn’t count in its earnings before interest, taxes, depreciation, and amortization.
“We do it every year. That’s what HBC is,” Baker said.
This is a significant cushion for the company’s business units, which include Saks Fifth Avenue, Saks Off Fifth and Hudson’s Bay brick-and-mortar operations. Apart from this, HBC is also the majority owner of the e-commerce business of these brands.
HBC has a real estate portfolio, but its retail business is more affected by consumer traffic.
“We have been predicting the economy very well since the height of the pandemic, but we made a concrete decision at the beginning of fiscal year 2023 that this was going to be a weak year,” Baker said.
That certainly turns out to be true, with retailers across the board reporting downturns as consumers digest all the moving parts of the economy, from rising interest rates to still-significant inflation. .
“We have aggressively reduced our inventory, which means we are ordering less,” he said. The company also cut back on some brands.
While this has repercussions in the market and smaller vendors are unhappy with Saks, the larger vendors’ operations are said to continue uninterrupted.
There are also other rumors plaguing the business amid an overall volatile retail environment.
Last week, the Instagram account Estée Laundry announced that Estée Lauder is suspending all Lauder brands, including Tom Ford Beauty, Jo Malone, Bobbi Brown, Mac, La Mer, and more, from Saks. He posted that he had given instructions. Some sources corroborated that, while others said there was a temporary credit dispute and the beauty giant was still shipping Saks as usual.
I had a lot of loader products available at saks.com over the weekend. And when times are tough, it’s common for rumors to spread and vendors to be dissatisfied.
Baker clearly thinks he’s above the fray, backed by his company’s real estate holdings and big plans for the future, especially its saks.com retail business.
These plans could become even bigger. Baker declined to comment in an interview, but is said to be courting Saks’ longtime rival Neiman Marcus again, with retail stars looking to buy the luxury retailer. It is still unclear whether they will cooperate.